By Krysti Shallenberger on Jul 30, 2025
Texas’ largest transmission & distribution utility, Oncor, has filed for an interim rate increase ahead of its full rate case, leveraging a failed bill from the most recent Texas legislative session to justify the ratemaking procedure.
While a common practice in some states for utilities to file for interim rate increases, Texas utilities could instead file annually to recover costs through investments in transmission and distribution, called capital trackers. Some Texas lawmakers drafted a bill that would allow for an interim rate increase – called “rate relief” by the utilities – but it failed to pass after generating broad opposition this session.
The Texas legislature has enacted utility-friendly policies in recent years to support utilities in recovering expenditures more easily. The legislature passed a bill in 2023 that allowed Oncor and other utilities to file twice a year to increase their distribution cost rate. The Legislature then passed HB 5247 in 2025 that allows utilities to file an annual comprehensive regulatory case to recover certain transmission and distribution costs and defer others. Sempra applauded the bill’s passage, saying in a June 8-K filing that the “use of the UTM instead of existing capital trackers is expected to improve the company’s earnings, cash flows, and credit metrics.”
Oncor, however, says that these procedural avenues are insufficient to restore its credit ratings and invest in grid infrastructure, and is employing the failed legislation’s “helpful framework” to calculate the interim rates.
Intervenors in the rate case said that by using the framework in the dead bill, Oncor “diminishes the established legislative process and the consensus of the majority that failed to pass the bill.”
The utility proposes raising its revenue requirement of $834 million or 13% through its formal base rate case, as well as increasing the return on equity (ROE) from 9.7% to 10.55% to afford parent company Sempra’s $36.1 billion capital plan investment for Texas. The formal rate case proposal would raise a household’s power bill by $7 or 4.7% and increase Oncor’s annual revenue from $6.4 billion to roughly $7.2 billion.
“This is consistent with Sempra’s 2030 aspirations of producing over 50% of its earnings from the State of Texas,” according to Sempra’s 2024 Q4 earnings report.
High utility profits via the ROE is a contributing factor to skyrocketing utility bills across the country. Oncor’s 10.55% ROE request is significantly higher than the national average of 9.7%.
In their filing for interim rate “relief,” Oncor wants to set a temporary revenue requirement of $6.7 billion until the Public Utilities Commission of Texas approves of the final revenue requirement, which is likely slated to happen either at the end of 2025 or early 2026. The interim rates will increase power bills for their larger customers who consume over 10kW of energy. The utility also blamed “regulatory lag” (the time between proposing and building infrastructure to collecting recovery costs) as a contributing factor towards why the company says it cannot wait until their new rates come into effect.
“Texas’ economic regulation of utilities is inherently backwards looking with its use of historical test years and capital needing to be in service before even beginning the rate recovery process. Regulatory lag during periods of high growth can be managed if other costs are simultaneously falling because of deflationary pressures or falling interest rates,” Brian Lloyd, the vice president of regulatory policy for Oncor Electric Delivery, testified to the Public Utilities Commission of Texas.
Oncor Electric serves the Dallas-Fort Worth area, home to the majority of Texas’ data center proposals, as well as the oil-rich Permian Basin. Both areas drive a significant part of the future demand growth in Texas, according to the Electric Reliability Council of Texas, with 150 gigawatts total load growth forecasted by 2030. Oil companies are increasingly looking to electrify their operations, a 2023 ERCOT report said, but have been stymied by the lack of transmission buildout, which ERCOT and the Legislature have worked to fix and something that Oncor plans to invest in heavily.
HB 3751
During the 2025 Texas Legislative session, lawmakers introduced a bill that gave utilities operating within ERCOT the ability to set interim rates before regulators approve the final rate increase, allowing for consumer refunds if the interim rates exceeded the final ones approved. HB 3157 failed to pass, as the bill attracted some odd bedfellows with the Koch-funded astroturf group Americans for Prosperity joining the Lone Star Chapter Sierra Club, the Steering Committee of Cities served by Oncor, and the Texas Oil and Gas Association in opposition.
Consumer and industry advocates testified during a House Committee hearing that the bill would weaken the ratemaking process and continue to push power bills higher.
“Utilities are state-granted monopolies; they are not subject to the forces of competition and as a result, we as the customers rely on the Commission to ensure the rates they want to us to pay are just and reasonable before we start paying them,” Katie Coleman, a lobbyist for the Texas Association of Manufacturers, told the House Committee of State Affairs in March. “The problem with this bill is it would allow utilities to start charging customers for whatever they believe the rate outcome should be, which is often wildly askew from what ultimately happens in the case.”
Public records show that representatives of CenterPoint, AEP Texas, Oncor and Entergy supported it.
Mark Bell, CEO of the Association of Electric Companies of Texas, told the Houston Chronicle at the time the bill would make the utility more attractive for investors.
Despite the bill’s failure to pass, Oncor still used it as a framework to calculate its interim rates.
However, in a joint response, intervenors opposing Oncor’s interim rate proposal fired back that the bill’s failure to pass should preclude using its calculations.
“HB 3157 was fully vetted, proceeded through the Legislative process, and ultimately not adopted by the Legislature, signaling its rejection of this concept, at least at this time. Allowing Oncor to implement interim rates with an adjusted temporary revenue requirement as laid out in HB 3157 may set a dangerous precedent for other utilities that will also argue for immediate rate relief.”
